Why Leave Extra Money in a Bank-Peter Schiff

Money manager Peter Schiff says, “Cyprus is a wake-up call for everybody who has a bank deposit. . . . When you are depositor, you are, in fact, . . . lending your money to the bank.” Schiff predicts, “There’s no question . . . banks will fail. The question is will government do the right thing and allow depositors to lose money. Or, do the wrong thing and bail out depositors by printing a bunch of money which, in the long run, means deposits will lose even more value.” The FDIC has just $33 billion to insure more than $10.8 trillion in deposits. Schiff is not expecting bank runs anytime soon. “Don’t expect an immediate stampede on the banks because I don’t think most people are smart enough to realize what the danger is,” says Schiff. What’s the best way to protect yourself? Schiff says, “Why would you leave any extra money in a bank to get zero percent interest. . . . I think pull your money out, put it into some kind of investment. . . . anything other than a piece of paper that’s going to lose value.” Join Greg Hunter as he goes One-on-One with Peter Schiff of Euro Pacific Precious Metals.

About the Author

Greg Hunter

Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.

Comments

bob03/27/2013 •

another great interview. i just hope i can get myself together before this goes down. i’m pretty happy that gold and silver is down, because this gives me time. hopefully another year. i know whats coming and don’t care that gold or silver is through the roof. it will happen eventually and hopefully i will be in a good position. no inflation? try living in my shoes BEN!

I too hope another year as well, but based on everything I’ve been reading and watching and sorting through (almost can’t take anymore)I don’t think we have that long either. Things seem to be speeding up.

But I’m still waiting for Schiff’s Euro to replace the US$ as the world’s reserve currency.
People, we aren’t Cyprus.
Maybe they should stamp the image of Tulips on Gold/Silver because it sounds like it’s going the way of Tulip Mania.

What Schiff says is very true about taking your money out of the banks and putting it to use via some investment channel.

Lets put that into context.

The “If” you have any spare cash sitting in the bank is the critical part. What percentage of people have spare cash …hmmmmmm?
These are desperate times and those out of work or living on the edge and trying to make ends meet certainly make up a large percentage of the population. They do not have spare cash….so we take them out of the equation. Even the middle class belt are finding it tough.
In reality Peter’s comments are more directed at the “10%”… those wealthy enough (good safe job, assets etc.) to have spare cash and the pension funds/money managers who have been sitting in cash waiting for opportunities to arise.
If you apply the golden rule that “Cash is King” and when you need the flexibility to make an acquisition, what else is there that is readily convertible/has liquidity like cash ?
Sure cash is a dead set road to loss of purchasing power and to continually trust the banks to hold it in good faith is definitely a path to wealth destruction. Do we keep our other assets in the “safe” hands of the Banks ? Absolutely not.
So for the mainstream this is probably not relevant unless you are fortunate enough to have a pension fund or 401K where your funds are allocated to cash.
For others.. take head….cracks are appearing in the financial system. Once the avalanche starts it cannot be stopped. You cannot say that the US is immune to the potential for bank runs. If confidence is lost and there is social unrest….the system will be tested. Then we will see who is naked and who was smart enough to foresee the inevitable and ultimately who waited too long to act and lost everything.

Greg: Thank you for asking Why has gold not taken off to the moon.
As I see it gold, and silver are in a pressure cooker. On the one hand people are suffering to pay bills, and cant spend 500.00 for 1/4 oz gold. Silver can still be found on the streets. However the folks that work 40 hours a week don’t have the time to look for it. As Troy put it Man-nip-ulation. With the currency wars continuing to heat up gold, and silver will be the last one (standing) in the pot because they are stronger then the heat, and the present container they have been placed in.
Every nineteen year old person lives in a pressure cooker. It causes them to grow to there desired place in life. The same can be said of gold and silver. Time will surely show the value of that which is real. Thanks.

As I understand several major banks are doing a lot of naked shorting of gold and silver ETF’s thus putting a lot of downward pressure on prices, then they’ve also been actually buying physical at these lower prices.

Accrdoing to PM advisor Paul Drockton, major banks llike JPM have been using this strategy on silver for some time……in fact, recently he presented figures that showed ‘ naked short selling’ of paper contracts that was to 5:1 vs. physical silver held by the Comex. It’s no wonder this type of strategy is being used to keep prices artificially lower while these same players continue to grab physical……and with foreign countries like China and Russia buying record amounts, looks like the banksters have plenty of company.

Cyprus will be used as a template, why let an opportunity to see what the sheep will do when their money is stolen, probably just suck it up like the American (people) lambs would do & go look for a low paying job to buy some bread. Sound cynical, you bet, but there is sometimes truth in cynical-ism if one inquires deep enough to find it.

The world stage is being set for a new larger currency, its just around the corner, out of ashes rises empires if you will. Presently the middle east is a powder keg, North Korea is threatening to nuke us, Wall Street is rallying with a FED printing to oblivion, thousands being added to food stamp rolls daily, all the while the Supreme Court is interested in the issue of our day (same sex marriage) and the President is out golfing with immoral celebrities while shutting down grade school White House tours; now I ask you Greg, how can this turn out good?

since 2010 we have listened to pundits,lobbyists,obamamedia prophesying the imminent fall of all things finacial yet chicken little has not run down the street …i think the world will bank here I agree that you should withdraw cash and hold it outside of banks i agree that real moneyis as it has for 70 years devalued but so has fixed rate mortgages and credit card debt I think that if you want to buy a used house car boat travel trailer most people will take $100 bills for one thing it is not traceable ay least for onerous sales taxes and assessments which have wormed their way into our lives like a virus just to pay the bloated pensions of govt do nothings while private pensions get ground down to nothing by those dreamers who think that we will have the money (and interest)to be taxed incessantly by the dreamers in govt…in our future ….remember renters dont pay sales taxes,house maintenance etc and can always leave anytime …if you have no visible assets no one can take them because like me i am house-poor and a big bank just sold my mortgage( 18 years )thus removing any moral obligations i may have felt to this bank

Private, unregulated American banks are the worst place to keep extra cash. Interest on bank accounts is the worst investment. I still have not made any money in the USA real estate market and not much in the stock market either. I am in Asia again watching the USA dollar continue to lose value.
People need to realize that the number of people in the USA on social assistance is greater than the combined populations of Canada and Australia. How can the USA function with so many people out of work, creating a drag on the system?
Why is everyone so complacent? There should be a revolt against the bankers, the government and others involved in the destruction of the wealth of the middle class. I guess they all believe all the lies.

You need to report on how low the USA is compared to other countries in terms of declining quality of life, health care, education, hours of work, disposable income, holidays and other things. The USA is so far from number one. There are many little countires in Europe like the Scandinavian countries, Switzerland and Germany where the populations have a much better standard of living, etc. Look at the world rankings.

The USA government wastes 40% of the budget on the military that has failed to defeat terrorism, the despots, the war on crime and the war on drugs etc, and for what benefit to the average person? China and Russia have already won, as the USA continues to fall.
Americans are too afraid to change their inferior, crony capitalist system, that is not democratic or fair, since it is run by the special interest groups that have bought the politicians in all parties who are obligated to satisfy their special interest groups.

Can you provide an example of an unregulated American bank? Legal tender laws and fractional reserve banking are elements of regulation which allow the banks to exist in their current form and to profit by creating money out of nothing. Without regulation there could be no banking as we know it. Regulation stops individuals from using sound money and forces them to rely on the paper money created by banks. Government is the problem.

jcdavis siad: “All banks that got a bail out is unregulated, and should be prosecuted along with the politicians that helped the theif, and fraud.”

jc,

You’ve got that completely backwards. The politicians whom you rightly call thieves enacted TARP as an act of government regulation. It was not a result of individuals in a free market volunteering to bailout the banks. Government is the problem.

Your work is very important and is much appreciated. Peter is smart and makes good points, but the following realities need to be clear.

1. The European Central Bankers, and their allies, are taught that everything we possess belongs to them, not in a symbolic sense but literally.

2. Bank customers tend to react emotionally at first, but then, after their emotional energy has been used up, most of them do little or nothing. The central bankers know this. That is why they are not in a hurry to steal the wealth of our nations but are skillful in taking small steps.

3. We need to recognize that these criminal acts by the central bankers and the EU are not idiotic or ignorant or incompetent, but that they are completely intentional and deliberate. When we understand this, then it will be possible to do something about it. Not before.

Greg, while the world falls off a cliff from the stupid ways of those in power there are many things also going on that the people need to know! Japan has been send nuke Rad’s by air & sea to the USA & the world for two years now & it’s effecting our entire food chain! Also there’s a sink hole in Bayou Corne LA, growing in size daily & the black out on the MSM is alive & well! http://www.enenews.com has daily updates on the sink holes & Japan nuke RAD’s coming to us like a non stop Volcano! DHS spends billions on arming up with fully auto weapons, ammo & MRAPS for local police depts,the US has let the NRC let unsafe nuke plants in the US to keep running after many experts have advised against it & the experts also have been kept from key meeting in front of congress, now the NRC is worthless as the FDA & other bought out gov agencies!

Your work is great Greg, I hope folks will check enenews.com daily! Also Fukushimafacts.com, thanks again on all fronts that need to be told!

Real money, personal possession of silver and gold, seems to be the best place to apply the FRN’s. Mr. Schiff mentioned buying property and stocks, but property can be taxed away and the stock market is rigged with most of the trading based not on value, but on computer trading programs.

Furthermore, it’s not only that banks that are robbing the public to fight insolvency. The governments are insolvent too, so, based on the historical playbook and not wondering whether government will “do the right thing”, we can look forward to what governments typically do when insolvent.

a) DIrect confiscation of people’s bank accounts through seizure by IRS or through civil asset processes.
b) Increased taxation.
c) Increased inflation.
d) Laws to restrict flow of capital across borders and keep it at home where it can be plundered.
e) Price and wage controls that create shortages in goods, increases in unemployment and expansion of government
f) Ever more draconian legislation to control and criminalize the public and to support the criminal/industrial complex.
g) National Emergencies- the politics of fear.
f) War – makes us forget about everything else.

The world seems to be collapsing into a cesspool and we need to look for answers in places deeper than are available through contemporary sources such as the controlled media, the self-absorbed political leaders or even laws and Supreme courts. By necessity, these must govern by compulsion and thus tend toward an increasingly totalitarian state for their survival and growth. We, on the other hand, were not created to be enslaved. The answer is not available through financial experts either as they simply describe the color of the flames that are burning our house down. So where do we look? Please allow me to move off the well beaten track…

The Book of Isaiah might be helpful. It opens with God outlining three steps that cause the downfall of nations:
1) Spiritual apostasy
2) Moral degradation
3) Political anarchy – the final state stage of a nation.

General Douglas MacArthur agrees with Isaiah. He noted ” History fails to record a single precedent in which nations subject to moral decay have not passed into political and economic decline. There has been either a spiritual reawakening to overcome the moral lapse, or a progressive deterioration leading to ultimate national disaster.”

What they both understood is that our Creator was not kidding when told us His blessings are characterized as manifest fruitfulness and security and that these blessings touch on every area of life: personal, familial, social, agricultural, military,national and more. Nor was He kidding when He said that a loss of blessings brought only futility, frustration, fear and destruction in all of these areas.

So, the answer to the question of how do we climb out of the cesspool lies, not outside, but within each of us. It’s our Creator, not the bankers or their servile governments, who is in control and we have the answer we’re looking for if we care to see it.

Individually, if we want blessings to return, we need to go back and rework Isiah’s list :

Read this background to understand how money is really created in our crazy current banking system. And read this and this to learn why we are paying trillions of dollars to the big banks in unnecessary interest costs.

Oh, the NAR/Realtor types are probably just eating this Cyprus thing all up. And Schiff and the other gurus are all too happy to prod you. Yeah.. better do something else with your money quick! And, very timely as the housing market is poised (my opinion) for another downturn.
Spend, spend, spend.. it’s our corporate/gov’t mantra afterall.
I’m not saying that the Cyprus precedent isn’t a threat and that isn’t causing any calamity, but realize that the average person in Cyprus probably isn’t taking a direct hit.. the haircut kicks in only on accounts holding fairly high amounts. The problem is more for business and the rich, which does however filter down in job payments etc. But in the finacial domino world, government is going to try to make the chips fall where they like. If it’s not one way it’s another. Generally though, they don’t like it when old ladies are in the street, people are starving, the woods people show themselves, and the collective with the government at the helm, seeks to find a way to temper the disparity at the cost of some social class blurring.

Greg,
Schiff nearly always says the same thing so at least he is consistent. Truly though it’s hard to envision our economy collapsing or the dollar collapsing, or gold sky rocketing. Rather, we have some significant deflationary forces going on: ton of debt, boomers retiring to the tune of 10000 per day, housing overhang, with foreclosures still occurring, and a global contraction, and wage compression. This means there are more goods chasing fewer buyers, or people with less money to spend.

So with these forces I just cannot see inflation or even hyperinflation coming any time in the next 3-5 years.

The factors we have going for us are: significant land resources, the worlds most reliable and pervasive electric and natural gas distribution system, relentless innovation in computers, web, robotics, biotech, energy resource development, oil and gas extraction, energy technology, and the worlds best patent system.

So it’s truly not all doom and gloom. The vast majority of new technology still originate here in the US. In fact no other country comes close. They all copy, but thats hugely inferior. Scientists, math experts, talented people still choose to immigrate here, rather than most other countries. Go look at the population stats of all other countries. None has anywhere near the inflow and infusion of new people, from all walks of life. People who are hungry for a new future, and motivated to reach their full potential. They don’t come here with false illusions of jobs. They know it’s hard, but they stil recognize there is no other country in a better position to allow the individual reach his or her full potential.

China will never be able to duplicate this. Their problems are far more historically engrained, and it will take 3 or 4 more generations to even come close to these advantages the US has. Sure we have problems, and we have lots of regulations that get in the way, but I’d bet you money, that if you actually lived in other countries you’d be able to find a zillion things there that look “horrible” or “disastrous.”.

Certainly I’m no Pollyanna. I see tons of things we have to change to remain sustainable. We can’t just grow our way out of the debt or deficit problems and can’t just print our way out either.

As far as banks, or the perpetually low interest rates, or people chasing too much risk just to get some yield, that does pose some problems. But the biggest problem I see for individuals or family’s which they have full control of is their spending. The Internet can be used for a lot of savings, but too it can be an immensely powerful lure for spending. Overspending and taking on too much debt is the problem most Americans have. Even with the people I see daily making not much in the wage of annual compensation, it truly makes me cringe when I see what they buy. The expensive cars, the vast amount of expensive electronics, clothing, high priced sneakers or many other goods that would be considered luxuries in the vast majority of countries outside the US.

So maybe rather than scaring people with these highly intelligent big picture folks, maybe you could be of far more service by interviewing the average couple or person who has demonstrated they can do quite well by some basic discipline on spending. And no I’m not talking about these frugalitists, or extremists like some preppers can be. I’m talking about average folks. Everyday folks. People who don’t make the magazines or talk shows or reality TV. The boring ones, or people who take the mundane, and turn it into significant wealth. Most of this other stuff presented by these people in your interviews is fascinating and probably truthful, but just not sure how much it offers in the way of helping people on a fundamental level.

Mike,
No problem here, individual house holds just need to bal. their budget;) Nothing to see move along.

Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers
Michael Snyder
Economic Collapse
March 21, 2013
Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.
The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.
We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.
The following is the global financial pyramid scheme by the numbers…
-$9,283,000,000,000 – The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.
-$10,012,800,000,000 – The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.
-$10,409,500,000,000 – The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.
-$15,094,000,000,000 – U.S. GDP. It is a measure of all economic activity in the United States for a single year.
-$16,749,269,587,407.53 – The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 – The total amount of money that the global elite have stashed in offshore banks (that we know about).
-$50,230,844,000,000 – The total amount of government debt in the world.
-$56,280,790,000,000 – The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.
-$61,000,000,000,000 – The combined total assets of the 50 largest banks in the world.
-$70,000,000,000,000 – The approximate size of total world GDP.
-$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
-$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
Are you starting to get the picture?
Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.
What we witnessed back in 2008 was just a little “hiccup” in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.
Next time it won’t be so easy.
The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.
The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.
And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.
The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.
But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.
The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.
But when you are tempted to believe that everything is going to be “okay” somehow, just go back and look at the numbers there were posted above one more time.
There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?

This was in the recent Federal budget. I am going to start with drawing all my money and buying gold….not keeping any cash in any institution with this recent revelation by the Canadian Government.

Look at the word bail in

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.

This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…

This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail”.

Greg …. The elite set the stage for the removal of debt and the return of bullion based currency in REAL-TIME when the fixed peg of $35/oz was severed in 1971. Gold’s liquidity is a product of (weight x trade value). They cannot finish the job and implement bullion based currency by way of any top-down support, however. A top-down process would be too powerful and abrupt which would crash the dollar (legacy system). The elite are simply relegated to their prescribed role of “carrying the stick” at this point. It’s up to a market driven , organic process to monetize gold …. bottom-up. Follow the script. The bankers have done well playing out the roles of the “necessary evils”.

Thank you as always for great information. I realize the FDIC Insurance is a joke and basically non-existent. Do you know if that also goes for the credit union insurnace, NCUA? Do you think that is also non-existent?

A collapse follows an accelerating path because as things grow worse, more people notice and react, which causes the villains to hurry their schemes, which causes more people to notice, etc. It is the nature of the evil parasites called government to work hard to make sure they rob most people before most people know they are being robbed. Expect everything awful that is going to happen to happen sooner than most people expect.

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Greg is the producer and creator of Greg Hunter’s USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin.

USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.